Follow These Fine-Print Examples If You Want To Fail

If you want to know why customers are bolting for the exits, talk to someone like Robert Barrows. He'll offer fine-print examples businesses should follow -- if they want to fail.

Barrows, an ad executive from San Mateo, Calif., recently had a bright idea for a new businesses venture. He pitched it to a large online retailer.

"I wrote them a letter about some proposals I had for some web-based projects," he says.

The company referred him to an online form. Buried in the fine print, just above the "accept" button, was a release. It allowed the company to buy his idea -- for $10.

"I didn't submit the proposal," he says.

Now imagine that scenario repeating itself over and over again every day. Fine print. Disclaimers. Clauses. Picture hundreds of thousands of unhappy customers like Barrows.

It gets worse. Federal and state agencies charged with protecting consumers against this nonsense are about halfway through a four-year nap, thanks to the government's hands-off approach to regulation.

Maybe I'm exaggerating a little. You have to scroll back to last year to find the Federal Trade Commission (FTC) really going after a company for hidden restrictions. In December, the FTC cracked down on a Dallas car dealership for deceptively advertised loan terms in ads. The real terms were buried in -- you guessed it! -- the fine print.

And in March, it charged a group of online marketers with deceptively luring consumers with “free” and “risk-free” trials for cooking gadgets, golf equipment, and access to related online subscription services. They buried important terms in pages of fine print that people could reach only through a tiny hyperlink, the FTC alleged.

But experts say the instances of fine-print deception are on the rise, despite these occasional enforcement actions. And over the long term, studies suggest deceptive advertising can hurt businesses -- not to mention consumers. It helps to know how we arrived at this point. I'll share a few examples and then tell you how we can escape this mess.

(Photo by Michael Gottschalk/Photothek via Getty Images)

More fine-print examples - and how it got started

Fine print has multiplied, according to Jane Muir, a Miami attorney whose practice focuses on commercial litigation, contracts, and general counsel. "I see it all over the place, from tickets to sports games to cereal boxes," she says.

Why is fine print such a "gotcha?"

"Terms of use have been interpreted to be very strong contracts allowed to be unusually restrictive," she told me. "This logic came from the early days of computing when you got a box full of floppy disks wrapped in cellophane and downloaded the software manually onto your computer. Microsoft used a little sticker on the wrapper, which said, 'If you break this seal you agree to our licensing terms.'"

There were lawsuits about that. That's because there's a principle that if one party has superior bargaining power over another, no contract between them can be fair because it is a contract of adhesion. The inferior party has no choice but to take it, says Muir.

But the courts rejected the argument that software offered a contract of adhesion with these shrink-wrap agreements. The reason? Users had choices of alternative software.

"This same theory was later applied to clickwrap agreements, which is what we have everywhere now," adds Muir. "You click to accept terms of use for every app you download."

These terms of use are allowed to provide no promises of quality. They can also insist on arbitration, a process so expensive that nobody wants to file a complaint, she notes. They can cap damages to an absurdly small number. And you don't find any of this out until something awful happens and there's no avenue for relief.

And slowly, these terms and conditions spread to other industries, with the blessings of courts and regulators. Which brings us to our current mess.

(Photo by Matthias Rietschel/Getty Images)

Fine print as far as the eye can see

One of my favorite sources for fine-print examples is Truth in Advertising (TINA). It's a nonprofit organization dedicated to empowering consumers to protect themselves and one another against false advertising and deceptive marketing. Here are a few recent examples of ridiculous clauses:

LG drowns in its own fine print

LG claims its phones are "water resistant." But one reader recently discovered the only thing it was resistant to is a warranty claim. She found out after her son ran water over his new phone and it broke. Turns out the phone's warranty does not cover defects. That includes "damages from exposure to moisture or dampness [nor] damage caused by … spills of food or liquid.”

Adore Me gets busted for too much fine print

Adore Me, a women's lingerie site, came under fire for the marketing practices to entice consumers into its VIP Membership Program. The fine print contained an undisclosed negative-option offer, according to TINA. Once consumers enrolled in the program, Adore Me made it "extremely difficult" to cancel. It kept $1.8 million from consumers who canceled their service, despite promises that store credits could be used “any time.” Earlier this year, the New York Attorney General's office announced a $4 million settlement with Adore Me.

Terra’s Kitchen cooks up some fine print

Or consider the class-action lawsuit filed against Terra’s Kitchen, a company that sells subscriptions for ready-made meals. The suit claims Terra's didn't adequately disclose the terms of its automatic renewal and continuous service offers. That resulted in consumers being charged without their consent.

"Consumers are subject to an ever-increasing amount of fine print," says TINA executive director Bonnie Patten. "It's in Apple’s iOS terms and conditions. It's in a plethora of recent General Data Protection Regulation compliance notifications. And it's in the multipage agreements hidden in a link next to the word 'submit' in every day online transactions. The information buried in the fine print has serious implications for our privacy, security, and finances."

Now what?

"Especially with the increased popularity of subscription-based products, we've also seen an uptick in consumer complaints," she says.

Why? The reality is that consumers are losing money. They're roped into deals like negative option offers. Those result in unwanted credit card charges, surprise fees, and useless warranties, says Patten.

"The increased use of fine print disclosures definitely has an impact on businesses too," she adds."Especially in terms of consumer trust and perception, which affects reputation and ultimately the bottom line."

Her advice to consumers: Skip the flashy photos, celebrity endorsements, and marketing hype. Scroll down. Read the fine print. That's your contract when you purchase a good or service.

“Term of contract will automatically renew unless either party notifies the other within 60 days of the annual renewal date”

“the monthly fee provided herein does not include ……” ;

“other charges to be billed”

“arbitration”

“mandatory and binding arbitration”

These clauses, he notes, make it "extremely difficult, if not impossible, for the consumer to legally dispute or challenge the actions of the other party."

And businesses need to know that littering their contracts with fine print is no long-term strategy. A plain-language contract is a good start. But listening to customers is the best long-term strategy. If they're complaining about a "gotcha" clause in your contract, maybe the fine print needs to be deleted.

Barrows, the almost-scammed ad exec, has another bright idea. "Maybe you should write a book about the fine print," he suggested.

I just might.

Christopher Elliott is the founder of Elliott Advocacy, a 501(c)(3) nonprofit organization that empowers consumers to solve their problems and helps those who can't. He's the author of numerous books on consumer advocacy and writes weekly columns for King Features Syndicate, USA Today, and the Washington Post. If you have a consumer problem you can't solve, contact him directly through his advocacy website. You can also follow him on Twitter, Facebook, and LinkedIn, or sign up for his daily newsletter.